Can Vanguard Crack Europe’s Top 3 ETF issuers?

The firm is Europe’s fourth largest issuer with 34 ETFs and $157 billion in AUM.

Asset gathering by Vanguard’s European ETF business is accelerating at breakneck speed this year, with August marking the firm’s strongest monthly inflows since it came to market more than a decade ago.

The Philadelphia-based manager’s low-cost core offerings booked $3.2 billion in inflows through the month, according to data from Bloomberg Intelligence, equivalent to 15% of asset gathering by all exchange-traded products (ETP) in Europe and punching well above the issuer’s 7% market share.

This marks an interesting development in the tussle between fund promoters, with Vanguard boasting three times the inflows of top three contenders Amundi and DWS–with $1 billion and $1.1 billion, respectively–meaning the gap between Vanguard and third-positioned DWS was marginally narrower than that between DWS and Amundi at the end of August.

This is a significant milestone given the U.S. manager took 11 years to break through $100 billion in assets under management (AUM) in its European ETF business. A year later, the firm now houses $157 billion across its range.

What makes this impressive is Vanguard’s ETF roster stands at just 34 products this side of the pond, whereas the top three issuers have a combined offering of more than 1,000 ETPs.

This means while it significantly lagged the $8.9 billion new money welcomed by Europe’s largest issuer, BlackRock, last month, Bloomberg Intelligence ETF analyst Henry Jim noted Vanguard’s take was “more than four times that of iShares” on a per product basis, at $94 million versus $21 million.

Speaking to ETF Stream, Vanguard Europe distribution head Robyn Laidlaw said the firm had little interest in mass product rollouts to capitalize on trending exposures.

“We are focused on the end investor and intermediary that serves them–we build products that serve as either portfolio construction tools or total portfolio solutions,” Laidlaw said previously.

“We are not interested in launching products for every trend or launching products for the sake of gathering assets.”

Exploring Actively Managed Fixed Income ETFs

However, the firm is investigating opportunities in underdeveloped niches such as actively managed fixed income.

“Active ETFs would not be off the table for us, but you have to get the right type of active in portfolios. If we were looking at active, it would be in the line of fixed income,” Laidlaw said.

The firm’s head of product specialism, Mark Fitzgerald, added: “We are the third-largest active fixed income manager globally, and we are the biggest buyer of sub-advised active equity management in the world. Active will not be off the table in ETFs, but we will have to understand if it serves a purpose.”

In terms of untapped client demand, Vanguard identified ETF uptake by retail investors as a key tailwind for its continued growth.

“Direct to retail or retail advised opportunity in Europe is significant because this is a group that has not really participated in ETFs to a significant degree thus far,” Laidlaw said.

A spokesperson for the firm added it has benefited from the adoption of ETF savings plans in Europe, with additional partnerships being established with platforms across Europe.

German and Italian uptake in the firm's LifeStrategy ETFs has made it the top multi-asset ETF issuer in Europe by assets under management (AUM), while ETFs now comprise around 25% of the AUM on Vanguard's U.K. Personal Investor platform.